Nightly News   |  October 09, 2013

Debt default could create ‘global crisis of confidence’

CNBC’s Andrew Ross Sorkin explains what could happen if the government defaults on its debt, something that would unsettle financial markets and force the Treasury Department to figure out who they ought to pay first. NBC’s Kate Snow reports.

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This content comes from Closed Captioning that was broadcast along with this program.

>>> there are nights we wish there was better news to report and then there is this. eight days now to the other deadline approaching. next thursday the government will hit the debt ceiling. if congress fails to pass it so the government can pay bills and b obligations, many are warning of a larger ka tast fe for the u.s. economy . kate snow has our report.

>> reporter: this is wall street . you might think if the u.s. government stops paying the debt the most immediate impact would be on the stock market . some say defaulting could potentially impact all these people around me. it could impact this entire city, cities all across the country. in fact the effects could be felt all across the globe.

>> every major country and every major bank around the world owns treasury bills. the day they don't believe that we are good for the money or that there is a risk that we are not going to pay them back on time, there is going to be a huge global crisis of confidence.

>> reporter: if congress doesn't solve this, what are we asking the treasury department to do?

>> if we pass the deadline the treasury department has few and only bad options. they have to decide who to pay -- social security ? or are they going to pay the chinese back who bought our treasury bills?

>> reporter: think of it like your checking account . as of october 17 the treasury department says the u.s. would have about $30 billion in its account plus income the from tax revenue coming in. on october 23, a $12 billion bill comes due to pay for social security payments. on halloween, we owe $6 billion in interest payments on our national debt . the next day, a huge bill, $67 billion for social security , disability benefits, medicare and pay for the military and re tires.

>> america would not be able to meet all of our financial obligations for the first time in 225 years.

>> reporter: some republicans say the president is exaggerating the risk of default.

>> default is when you can't service your debt. we have enough money coming in.

>> reporter: even if we pass the debt ceiling deadline they say there is enough the money on hand.

>> i am not advocating going through the deadline. i am saying if you go through it, you will not default and leaders in our country should reassure the world's markets we will not default.

>> reporter: some republicans suggested the government prior uh tiez and pay important interest payments first. the administration says that's not practical. the treasury department pays literally millions of bills every day and they say it would be complicated to figure out which one of those to pay first.

>> kate snow with the other portion of all of this. thanks as always.